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What is a Let to Buy Mortgage?

Interested in purchasing a new home, but want or need to keep your existing one? If so a let to buy mortgage could be an option for you. Let to buy mortgages are a type of specialist finance that allow homeowners to buy a new home whilst converting their existing one into a rental property. This arrangement enables homeowners to become landlords and release equity as a deposit for a new property. You’ll then have two mortgages: your existing residential becomes a let to buy and you take out a new residential mortgage for your new home. Once you have the let to buy mortgage you can let your previous home to tenants and use the rent to cover the mortgage payments. 

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Who Are Let to Buy Mortgages For?

Let to buy mortgages can be a good solution for homeowners who want to buy a new home and retain their previous one as a rental investment whilst releasing equity from it to use as a deposit. Some of the most common scenarios we see where a homeowner considers let to buy include: 

  • You want to buy a new property with a partner and want to rent out your previous address(es) 
  • You’ve found a new property but are struggling to sell your current property in time. You also want to use the equity as the deposit for the new purchase. 
  • You need to relocate for work purposes and want to let out your property whilst you live elsewhere. 
  • Your property’s value has dropped since you bought it. You want to avoid making a loss by selling it now so you rent it out until the value goes back up. 

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Let to Buy Mortgage Criteria:

When it comes to applying for let to buy mortgages, homeowners must meet certain mortgage criteria. Whilst these criteria vary between lenders, typically lenders review the following: 

  • Your age. Lenders have minimum and maximum ages as to who they will lend to. 
  • How much deposit or equity is available? 
  • Does the rental income cover a minimum of 125-145% of the mortgage payment 
  • What does your credit history look like? 
  • What income do you have? 
  • Whether you can supply evidence that you’re buying another home at the same time 
  • Some lenders will require that both mortgages legally complete on the same day 
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How Do Let to Buy Mortgages Work?

If you are buying another property, you’ll need two mortgages. You’ll need a let to buy mortgage for your existing property and a standard residential mortgage for the new property. You may be able to take out both mortgages with the same lender or may have to go with two lenders depending on your circumstances. You’ll normally be able to use the let to buy mortgage to borrow more so that you can release equity for the deposit needed for the new property. 
 
Your current mortgage is not usually considered a commitment when the lender determines how much you can borrow for the let to buy mortgage. They will however, look at the expected rental income to check that this will comfortably cover the future mortgage payments. The total borrowing will also need to fit the lender’s loan-to-value criteria. 

Mortgage Rates:

Let to buy mortgage rates can be more expensive compared to residential mortgage rates. They can also vary, which is why it’s so crucial to work with our experienced mortgage advisers. They will search the market and recommend competitive deals that are the right fit for your situation. 

Let to Buy Mortgage Lenders

There are a range of lenders in the UK who offer let to buy mortgages, from traditional banks to specialist lenders. Which lender is right for you will depend on your circumstances and personal finances. It may be possible to apply to have both your let to buy mortgage and residential mortgage with the same lender. But whilst this can make applying for the mortgages more straightforward, you may find there is less flexibility in criteria and rates. That’s why it’s worth working with our team of experienced mortgage advisors, who can recommend mortgages that will be the best fit for you. 

Are Let to Buy Mortgages Worth It?

There are several benefits for homeowners who choose let to buy mortgages: 

  • You don’t have to sell your current home. This can be helpful if you’re struggling to sell but need to move to a new house, or if you need to relocate to another area. 
  • Let to buy allows you to retain your previous property. If house prices rise in future, the properties become valuable assets for inheritance or resale. 
  • If you’ve moved away for work, let to buy means you can move back to the property in the future. 
  • You’ll receive an income from the rent on the property you let out. 

Other Factors to Consider:

Whilst there are many benefits associated with let to buy, before you commit to a let to buy mortgage it’s also worth considering the drawbacks: 

  • Maintaining multiple properties can be expensive 
  • How will you cover periods of rental voids (when the property is empty)? 
  • Interest rates can be higher on let to buy mortgages compared to the rates charged on residential mortgages. 
  • You’ll be liable for additional stamp duty charges as you’ll have a second home 
  • If house prices fall this could affect both properties and could cause issues when you come to sell 
  • Fewer lenders offer let to buy mortgages which could restrict the choice of competitive rates and flexibility 

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Why Choose Simple Fast Mortgage to secure your let to buy mortgage:

As reputable mortgage advisers, Simple Fast Mortgage specialises in let to buy mortgages. Our experienced team offers tailored advice and expert guidance, recommending the right mortgage for you. Our team takes the time to listen and truly understand your circumstances and then searches the market on your behalf. We’ll then recommend the mortgage that is the right for your personal situation and liaise with all interested parties on your behalf. With over 20 years of experience and our professional connections, you can rest assured that you are in safe hands. Contact us today to start your let to buy mortgage application. 

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